More Good News from Trump Administration on Lowering Health Insurance Costs

The WasteWatcher

December 4, 2018 — Elizabeth Wright

It’s a common saying in D.C., that bad news gets released on Fridays. But, that was not the case on Friday, November 30, 2018. Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma announced that her agency was releasing four waiver concepts to help governors and state legislatures take advantage of Section 1332, Waiver for State Innovation, found in the Patient Protection and Affordable Care Act (ACA), or Obamacare.

Friday’s announcement is an important follow-up to new regulatory guidance on 1332 waivers that was released on October 22, 2018. CAGW wrote about the importance of this guidance and how it eases up on the strict restrictions the Obama administration placed on utilization this section of the law. The Trump administration guidance will give states much more flexibility in designing systems that will stabilize and improve their health insurance markets.

Obamacare devastated individual health insurance. For example, between 2013 and 2017, premiums increased on average in the Federal Exchange by 105 percent, even though Americans were promised Obamacare would reduce premiums on average by $2,500 per family per year. Young, healthy adults in the 18-34 age group are still not participating at the numbers required to stabilize the exchanges, which actuaries believe needs to be around 40 percent. This age cohort was at 26 percent of total enrollment in 2018. Many young people, rightfully so, believe the insurance is not worth the cost.

Section 1332 of Obamacare permits states to apply for innovation waivers that allow them to make changes to Obamacare, albeit within strict guardrails. A state must prove its proposed waiver will:

Provide coverage that is at least as comprehensive and affordable as the current coverage;

Provide coverage and cost sharing protections against excessive out-of-pocket spending that are at least as affordable as Obamacare;

Provide coverage to at least a comparable number of its residents as Obamacare does; and,

Not increase the Federal deficit.

According to CMS, 14 states have submitted 1332 waivers as of December 4, 2018. While some states have withdrawn their waivers and others have not been completed, seven of the waivers are being used to create and help fund reinsurance programs. Reinsurance is often called insurance for insurers and they are utilized to share risk. These waivers have enabled the states to use federal funds slated for Obamacare to help fund their reinsuranace programs, lower and stabilize premiums, and continue to help people with pre-existing conditions get access to affordable health insurance.

A March 2017 Health Affairsblog discussed how Maine used reinsurance effectively in their state to lower insurance costs prior to Obamacare deactivating it. Maine submitted a 1332 waiver in May 2018, which was approved in July, to reactivate their successful reinsurance policy.

The four waiver concepts will provide additional help to states in utilizing the Sec. 1332 process. The concepts are road maps for governors and their state legislatures to properly design a waiver and get them approved. These concepts are based on patient-centered healthcare ideas longed pushed by free-market policy wonks. They are:

Account-Based Subsidies: This will allow states to direct public subsidies into a defined-contribution, consumer-directed account that an individual may use to pay for health insurance premiums and or other healthcare expenses;

State-Specific Premium Assistance: States will be able to use this concept to create a state-administered subsidy program. The structure of these programs could be used to meet the unique needs of its population to provide more affordable healthcare options to an expanded range of individuals and attract more young and healthy consumers into their market. It could also be used to provide relief from the subsidy cliff, the point where a person’s household income changes, sometimes by a minimal amount, and becomes ineligible for financial help;

Adjusted Plan Options: This concept would enable states to provide financial assistance for different types of health insurance plans, including non-Qualified Health Plans. This will help to increase choice and provide more affordable insurance; and

Risk Stabilization Strategies: This concept will assist states address the costs of individuals with high health care costs by giving them more flexibility in implementing reinsurance programs or high-risk pools.

These concepts are just what was needed by governors and state legislatures to help them utilize the 1332 waivers in a productive way. They will be able to modify Obamacare in ways that will meet the needs of their population and help bring down costs in their state, enabling more people to become insured and protect those with pre-existing conditions.